liability of service tax

[faruk patel]

Dear All,

Our client provide erection and commissioning services. during providing services, He sold scrap material which was not usable. Assessing officer argued that it is consideration received other than cash so he issued final show cause notice.

Kindly give suggestion whether service tax would be payable? also suggest case laws on above matter.

Regards,

faruk patel

[Ramanujam Varadarajan]

If sale of scrap material is independent of contract of erection and commissioning service agreed, there is no liability to service tax.

[Akash Deep]

The ability shown by assessing authority is beyond reach of human race. the activity of sale of scrap is totally separate from the activity of providing service. Moreover, the consideration against sale of scrap is not flowing from service recipient hence can not be included in taxable value of service. Further, if sale of scrap is taxable at all, it would be subject matter of VAT and not exigible to service tax. The amount received against sale of scrap can never be subject tot service tax by way of including it in taxable value of service.

AI Summary

Sale of scrap distinct from service should not be included in taxable value and may be subject to VAT instead.
Sale of scrap recovered during erection and commissioning is not part of the taxable consideration where the sale is an independent transaction and the consideration does not flow from the service recipient; such disposal, if taxable at all, should be treated under VAT/sales tax principles rather than included in the service tax taxable value.